Forex Weekly Outlook Oct 29 – Nov 2

The US dollar made gains, including against the other “safe haven” currency – the yen. As one month ends and another begins, will we higher volatility? Important US data is coming our way with ADP Non-Farm Employment Change, Manufacturing PMI and jobless claims which all lead to the all important Non-Farm Payrolls – just days before the elections. Here is an outlook on the major events awaiting us this week.

The US economy grew at a pace of 2% in Q3, according to the initial release. This was somewhat encouraging. More good news from the US, weekly jobless claimsdropped 23,000 last week below the 371,000 rise predicted by analysts. In Europe, decision time is getting closer for Greece and Spain. Will the US economy continue this positive trend? Let’s Start

Japan rate decision: Tuesday. The Bank of Japan kept interest rates unchanged at 0.10% since December 2008, also maintaining the size of its Asset Purchase Program, as predicted. The BOJ forecasts growth will return upon continued strong domestic demand and improvement in global markets. The major risks remain the EU debt crisis and global uncertainty. No change in rates is expected. However, there is growing talk about an expansion of the QE program by 10 trillion yen, a move that could be big enough to push USD/JPY even higher. Japan’s trade balance is worrying.

Mario Draghi speaks: Tuesday, 8:00. Mario Draghi President of the ECB is scheduled to speak in Frankfurt at the Second Conference of the Macro-Prudential Research Network of the European System of Central Banks. He is likely to defend his bond-buying plan to ease the eurozone’s debt crisis. His speech can cause volatility in the market, especially as he references Greece or Spain. Note that also a rate cut is on the cards after his recent warning on deflation.

US CB Consumer Confidence: Tuesday, 14:00. American consumers’ sentiment surged to70.3 in September, the highest level since February, amid a flaw of encouraging data on business conditions. This reading followed an upwardly revised 61.3 score in August. Economists expected a lower reading of 63.1. a rise to 72.4 is expected now, after the UoM figure is also on the rise.

US ADP Non-Farm Employment Change: Wednesday, 12:15. The Automatic Data Processing National Employment Report showed that US businesses added 162,000 jobs in September, way above the 145,000 rise predicted, indicating continued expansion in the US market. However despite the positive figures, last month’s reading was revised downward to 189,000 as well as a downward revision in the preceding month. Because of these revisions, the ADP Data failed to cross the 200,000 line since March 2012. A job addition of 139,000 is predicted now.

Canadian GDP: Wednesday, 12:30. The Canadian economy expanded more than expected in July, rising 0.2% following a 0.1% increase in June, above predictions of a 0.1% growth rate. The overall pace of growth is modest; however in case it exceeds an annualized pace of 2.0% the BOC will have to stop its monetary stimulus to prevent the exhaustion of excess supply. Another 0.2% growth rate is expected this time.

US Unemployment claims: Thursday, 12:30. The number of initial claims for unemployment benefits dropped 23,000 to a seasonally adjusted 369,000 last week , indicating a real improvement in the labor market. The manufacturing sector strengthened in September boosting job creation. A small rise to 371,000 is forecasted.

US ISM Manufacturing PMI: Thursday, 14:00.US manufacturing PMI climbed better than predicted to 51.5 in September, following 49.6 in August, crossing the 50 point line indicating expansion in the manufacturing sector. New orders edged up from 47.1 to 52.3 while export orders rose from 47.0 to 48.5. A small decline to 51.1 is anticipated now.

Canadian employment data: Friday, 12:30.Canada’s job market gained 52,100 new jobs in September, surprising economists’ predictions of a 11,700 job increase.September’s sharp rise pushed year-over-year job creation to 175,000. The Canadian job market is much better than its neighbors. Retail and wholesale trade sectors gained 34,000 new jobs, while 29,000 new jobs were created in construction. Meanwhile Unemployment rate edged up to 7.4% in September from 7.3% in the preceding month. However the Canadian work force grew by 7.4%. Analysts predict a job addition of 7,800 jobs and a decline to 7.3% in unemployment rate.

This week we created our own view about what could happen with the main currencies, especially EUR$ and $JPY. We analyzed the previous week and we generated our view based on both fundamentals and techincals.

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